According to new research, Bitcoin (BTC) is experiencing a unusual chart pattern that has a long track record of generating 50% price drops.
On April 25, 2022, Nunya Bizniz tweeted a fresh signal from two critical moving averages on BTC/USD.
For the first time in its history, Bitcoin’s 20-week and 50-week moving averages (WMs) have both begun to drop.
While it may appear to be harmless at first glance, the consequences of the first two occurrences — in late 2014 and late 2018 — were BTC/USD declining by over 50%.
Both occurred at roughly the same spots in Bitcoin’s four-year halving cycles, and while somewhat early, it has been nearly as long since the 2018 slump that bottomed out at $3,100.
The 20-WMA crossed below the 50-WMA in mid-March, according to data from Cointelegraph Markets Pro and TradingView, marking what is known as a “death cross” movement among chartists. Despite its name, the occurrence has not always resulted in hefty losses.
US Dollar Inflation Affects All the Markets
The strength of the United States dollar in the face of anti-inflation measures taken by the Federal Reserve is also under scrutiny as a preventive clue for analysts who predict a shock occurrence after two years of liquidity creation.
Analyst Dylan LeClair added another Twitter thread on the subject on April 24. “DXY approaches multi-decade highs,” he noted.
For LeClair, it’s all about the short-term pain for long-term gain for BTC hodlers. The Fed will pivot when it can no longer maintain inflation-busting monetary tightening, which will eventually lead to a recovery.
Extreme Fear Hits the Market Buyers
With cryptocurrency continuously looking red in the weekly and monthly charts, more people are bailing out of the market until a confirmation of another uptrend sets in. With no new groundbreaking event like July 2021’s B-Word conference is taking place, whispers of a continuous decline spread throughout forums, especially on r/cryptocurrency.
Anybody practicing Dollar Cost Averaging (DCA) may not see this as a threat to their investments, but those who YOLO’d during the hot streak of BTC from late February to March may see a significant liquidation of their portfolio – what more for those who bought BTC at the $69K top.
New Opportunity or a New Drop?
Fear and uncertainty continue to linger in social media and forums, resulting in mixed reactions: some may see this as a window of opportunity to buy, and others want to see the price drop even further.
With analysts setting their eyes on $35K as the crucial support area, we may still see a further drop beyond that. After all, cryptocurrency is still the most volatile market right now.